We present evidence on whether workers have social preferences by comparing workers' productivity under relative incentives, where individual effort imposes a negative externality on others, with their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers' behavior.
Authors
CPP Director, IFS Research Director
Imran is Professor of Economics at University College London and Director of the Centre for the Microeconomic Analysis of Public Policy at the IFS.
Oriana Bandiera
Iwan Barankay
Journal article details
- DOI
- 10.1093/qje/120.3.917
- Publisher
- Oxford Academic
- Issue
- Volume 120, Issue 3, August 2005
Suggested citation
O, Bandiera and I, Barankay and I, Rasul. (2005). 'Social Preferences and the Response to Incentives: Evidence from Personnel Data' 120, Issue 3(2005)
More from IFS
Understand this issue
If you can’t see it, you can’t be it: role models influence female junior doctors’ choice of medical specialty
24 April 2024
Retirement is not always a choice that workers can afford to make
6 November 2023
How did parents’ experiences in the labour market shape children’s social and emotional development during the pandemic?
1 August 2023
Policy analysis
Recent trends in public sector pay
26 March 2024
Gap between higher- and lower-paid public sector workers falls by more than a third since 2007 as doctors and experienced teachers have faced unprecedented pay cuts
26 March 2024
Progression of nurses within the NHS
12 April 2024
Academic research
Labour market inequality and the changing life cycle profile of male and female wages
15 April 2024
Interpreting cohort profiles of lifecycle earnings volatility
15 April 2024
There and back again: women’s marginal commuting costs
2 April 2024